The Chiu-Herrera Reforms

It may be no coincidence that the last time San Francisco forced ethics reforms on City Hall was during Willie Brown’s term as mayor. At that time, Brown’s administration was pockmarked by the influence of political consultants and lobbyists, from his former aide Billy Rutland to his campaign strategist Jack Davis. A cadre of political consultants controlled mailing lists, could arrange for vendors to be paid after the election, and orchestrated slate cards. In some cases, candidates were virtually the invention of a consultant looking for a way into an election and the result was a series of one-term elected officials.

The emergence of consultants was a natural byproduct of the political vacuum created with the reduced influence of the Burton “machine” that mentored people into the political system, gradually elevating them based on a series of factors of which money was only one. Political clubs became the hunting grounds as consultants saw their influence with voters and the inherent purpose of these ideological and community organizations gave way to “club stacking” and vote buying. As endorsements came up for a vote, club membership could swell by several hundred people who had never previously belonged and would depart as soon as they cast their ballots.

In the current political environment, 15 years after Ammiano’s Honest Elections Act, City Hall machinations are more likely to involve lawyers who invoke their status to shield their role from public view.

While the City Attorney’s opinion is more than 15 years old that lawyers are not exempt from reporting their lobbying activity, the city’s Ethics Commission has been unwilling to enforce that opinion. Under the city attorney’s terms, attorneys are exempt only when acting in a capacity that requires membership in the State Bar such as appearing in court representing a client.

The Chiu-Herrera reform spells out in unmistakable terms that lawyers who represent clients when it comes to legislative or administrative decisions are considered to be lobbying and must disclose their activity and pay.

Among those likely to be affected is Enrique Pearce who, according to the Chronicle, met with Supervisor Wiener to request amendments to the student housing legislation that would benefit his client, the Academy of Act University. He claimed that he was acting as the attorney for the Academy of Art.

Kevin Heneghan, an attorney now with Hanson Bridgett, serves as the treasurer of the Mayor Ed Lee Committee for San Francisco, launched last year under terms that allow it to avoid the law that bans contributions from city contractors and limits contributions to $500. The Heneghan-Lee set-up raised $400,000 last year including tens of thousands from those who depend on Lee for their financial interests. Hanson Bridgett is also the law firm handling the America’s Cup. He has never filed as a lobbyist.

James Sutton was an early example of serving as both an attorney, a committee treasurer, and a strategist to various campaigns dating back to the Jordan Administration. He leads the class in the amount of fines levied against him for failing to observe campaign laws with a $240,000 fine against a 2002 committee funded by PG&E to defeat a public power measure.

Many City Hall observers identify former Mayor Willie Brown as the poster child for using his status as an attorney to shield himself from public disclosure. Suspicions of his role in the Lee Administration are fueled in part by the list of clients he had to disclose when he was a member of the State Assembly. Those clients included Recology, Pacific Gas and Electric, Catellus, among others, all of whom remain wedded to City Hall decisions to enhance their profitability.

Most recently, Brown was at a dinner with Mayor Lee, Lennar’s representative (and former Brown aide) Kofi Bonner, Rose Pak, and representatives from China to discuss potential Chinese investment in San Francisco’s former redevelopment projects. Brown himself stood to benefit if he could secure funding as a result of his Golden State Renaissance Center that awards foreign investors with permanent visas, pegged at about $40,000 each to Brown’s company. The mayor’s office was unable to say who paid for the mayor’s dinner.

In a report commissioned by the San Francisco Housing Authority, it was revealed that former SFHA Director Henry Alvarez told his agency’s lawyer that he had had lunch with Willie Brown and an applicant for the agency’s security contract and that Alvarez now wanted the contract awarded to Brown’s luncheon partner. When that did not happen, the agency’s lawyer said that Alvarez ordered a fourth round of bids. The report states that Alvarez denied that this happened. The Bay Guardian reported that the company had been hired before when Brown was mayor and Ronnie Davis, who later pled guilty to criminal charges, was the Housing Authority director. Brown attended a fundraiser to help Davis pay his legal fees in that criminal case. Whether even such a scenario as lunching with a department head and an applicant for a contract would be deemed lobbying is unclear because it is not known if Brown specifically asked that the contract be awarded.

As it now stands, Willie Brown and others may well still avoid public disclosure since the lobbyist provision only comes into play when city officials are contacted. With the law’s “time out” provision that bars former city officials from contacting current officials for up to two years, it is more likely that these retirees will instead play a behind-the-scenes role advising clients on who to contact, what to say, and identify potential allies from interest groups. This would be captured if the law includes a provision that those seeking city decisions must also report the consultants who advice them, whether it is architectural firms, pollsters, or community advocates. It remains to be seen if such a provision will be put on the table.

Lawyer-lobbyists also have been given a free pass from reporting when representing a client on contracts with City Hall. Under the Chiu-Herrera reforms, this loophole would close so that only the contractor would be given the exemption from reporting. This would include contract renewals, disputes over billing and such issues as adherence to the city’s laws on hiring and wages.

One additional change for lobbyists underscores the extent to which the devil is in the details. The Chiu-Herrera reform changes the threshold for lobbyist reporting from $3,000 in a quarter to $1,000 in a month. Since some lobbying is done in a short time but is less than three months and less than $3,000, this will capture more of the City Hall influence peddlers. One example: before the Ethics Commission convinced the Board that the three month-$3,000 threshold would streamline lobbyist reporting, the San Francisco Chamber of Commerce regularly reported its activities aimed at influencing City Hall. After the Ethics Commission proposed changes became law, the Chamber no longer filed lobbying reports and said that their activities now fell below the lobbying threshold.

In an unspoken acknowledgement of the Ethics Commission’s failure to enforce the city’s laws on lobbying, the Chiu-Herrera proposal now will require Ethics to conduct at least one audit on a lobbyist every year. Since lobbying was brought under Ethics in 1994, there has never been an audit or enforcement for failure to register.

Nonprofit agencies: The New Play for Pay?

During the Ammiano era of reforms, the city’s numerous political clubs were the hotspot for campaigns. An endorsement would then be backed by large contributions from the campaign that won those pitched battles; in some cases, endorsements appear to have been made on the basis of promised financial resources to put out a slate card or walking pieces. And, in some cases, clubs were created solely to make endorsements in campaigns only to disappear like the morning dew after the day after the election.

That tide has turned and ebbed away but political campaigns have not been left stranded on a bare shore. Instead nonprofits have become the new asset for those seeking City Hall clout.

Nonprofits can not endorse candidates but they can endorse ballot measures or support or oppose measures pending at City Hall. The fact that their donors and funders are cloaked in secrecy gives them an added advantage, as does the fact that their members or clients remain unknown – unlike political clubs where members would show up with reporters standing at the ready to record a raucus caucus.

Today’s nonprofits run the gamut from the Chinese Community Development Center to the Parks Alliance to the San Francisco Foundation. Some, like the Parks Alliance, pass through campaign donations in the six figures. Others provide an army of supporters to show up at Board votes or work the community events. Many also receive significant funding from City Hall with the support of the mayor, who has his own interests in various campaigns.

Whether these nonprofit groups are receiving financial help from those hoping to win City Hall favor is unknown – but will become transparent under one provision of the Chiu-Herrera reform that requires disclosures of contributions of $5,000 to nonprofits active in the city made by developers of major projects that require an Environmental Impact Report.

Nothing about this dynamic suggests that the nonprofits who participate in these efforts are not providing important and worthy services, or that they benefit the city.

One City Family Story

That is certainly the case for the Chinese Hospital that has been serving San Francisco’s monolingual Chinese since the 1880’s. It had identified significant financial needs for its facility and now is embarked on a fundraising drive to raise $50 million toward a new $150 million facility.

The fundraising chair is Rose Pak, who also is a Board member for the Chinese Hospital. Pak told one magazine that she has already raised $25 million. Pak is also a vocal supporter of Simon Snelgrove’s plan to build record-setting luxury apartments at 8 Washington that will create a wall along the Embarcadero waterfront.

For Snelgrove to win community support – especially now that the issue will go before voters this November – he needs community allies.

To put together the footprint for his luxury gated apartments, he had to first win approval from the Port Commission. The chair of that Commission is Doreen Ho, newly named to that post by Mayor Lee. She is married to James Ho, the President of the Chinese Hospital.

According to a magazine profile of Pak, Snelgove “is an old friend and a frequent guest on her (Pak’s) China trips.” Prior to the recent Democratic County Central Committee vote on its position on 8 Washington, Pak made at least one call from China to a DCCC member to lobby for support for Snelgrove’s 8 Washington.

Snelgrove also committed to provide $11 million for affordable housing, something that might provide a funding source for the Chinatown Community Development Center. Pak’s friend David Ho is the deputy director there, familiar with the 2,200 apartments owned or managed by CCDC. Their residents can sometimes be found sitting in the Board chambers when votes are coming that are important to Pak.

Whether Snelgrove made significant contributions to the Chinese Hospital isn’t known under IRS rules. But under the Chiu-Herrera proposal, Snelgrove would be required to disclose if he contributed $5,000 or more to nonprofits like the Chinese Hospital or CCDC or even the Chinese New Year’s Parade which is run by Pak.

None of those cozy relationships would be affected by the Chiu-Herrera reforms but their existence would become subject to public disclosure. The requirement would apply to developers of major projects in San Francisco that require Environmental Impact Reports.

Permit Expediters Figure In Reform Proposals

A welter of city regulations affecting almost every aspect of construction and development from home remodeling to multi-million dollar highrises confront applicants. Most homeowners facing the need for special permits for window replacement or electrical or plumbing work rely on their contractor to obtain the necessary permits.

In the case of major developers, however, an industry has grown up that, over time, developed close ties with city departments. These relationships gave rise to concerns that special consideration was given to their clients as a result.

However, they operated in a gray area with little public disclosure of who they are, what clients they are serving, and what projects are being facilitated.

The Chiu-Herrera reforms will now require permit expediters to register and disclose their clients and all permit-related contacts with city officials. In effect this closes the loop of those seeking administrative or legislative approvals on behalf of clients just as lobbyists must do.

De-Politicizing Grants and Contract Modifications

The final piece in these reforms would put a brake on awarding grants or modifying contracts by requiring regulations be adopted that ensure a public purpose is being served and including that information in the grant announcement.

While this may appear to be the type of common sense requirement that surely must already be part of the city’s rules, it became abundantly clear that grants have been awarded in at least one case in exchange for working in a political campaign.

In an investigation into then-Deputy DPW Director Mohammed Nuru’s handling of contracts, City Attorney Dennis Herrera documented Nuru’s use of a city contractor and grantee, the San Francisco League of Urban Gardeners, to assist in the election of candidate Gavin Newsom as mayor and candidate Kamala Harris as District Attorney (see http://www.citireport.com/2012/03/lee-vs-nuru-not-happening/).

Herrera was powerless to take action in that case and instead city rules required him to forward the investigation results to Nuru’s supervisor who was City Administrator Ed Lee and DPW Director Ed Reiskin. In that case, Lee took no action against Nuru and instead made a pathetic effort at addressing the issue by simply asking grantees and contractors to confirm they had complied with all the rules. All promptly did so.

Today all those directly involved have risen to higher posts. In January 2011 Ed Lee was named interim Mayor. Within months, Lee promoted Reiskin to head the city’s Muni and Nuru to be the new Director of the Department of Public Works.

The only casualty were the low income worker-trainees in the League of Urban Gardeners who all lost their jobs when the agency was later defunded.

The new Chiu-Herrera proposal means that the city would not have to rely on the department head’s integrity and commitment to taxpayers to ensure that a public purpose is met when contracts are modified or grants awarded.